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Internationalization Theories IB

The Uppsala model has a step-by-step process but is difficult to apply currently. TCA considers transaction costs but approximations are imprecise. The network model is flexible but companies depend on others. Born globals are global from the start but focus on a single product/market.

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Manuela Arévalo
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46 views6 pages

Internationalization Theories IB

The Uppsala model has a step-by-step process but is difficult to apply currently. TCA considers transaction costs but approximations are imprecise. The network model is flexible but companies depend on others. Born globals are global from the start but focus on a single product/market.

Uploaded by

Manuela Arévalo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INTERNATIONAL BUSINESS MANAGEMENT

Manuela Arevalo
Angela Rozo
Paula Cubillos
● Summarize in a mind map, chart or infographic the main characteristics or elements of
each theory.
● Give your opinion about them and pros and cons of each (2)
★ The Uppsala internationalization model

It is a model established many years ago, which is why it is difficult to apply it to current
organizations. For many entrepreneurs, the fact of having a step-by-step model of the
internationalization process could be rewarding and they could support their decisions in what
is proposed by this theory, however, the dynamism of the current economy makes it almost
impossible to follow sequentially a series of actions without having to go back to the previous
step and make corrections.

PROS CONS

The internationalization process is based on The model was designed for


experiential knowledge which means that internationalization processes of many years
the firm takes into account the past results, ago, currently investors are more risky
allowing the organization to have a better because they know that their returns will
understanding of the goods and services also be higher, which is why it is more
they sell to perform better outcomes in the difficult to adapt a step-by-step model.
new market.

The uppsala model provides 4 steps that are The fact that the firm starts in a new market
very accurate to reduce risk in the respective with low-resource commitment could
investments, what is really important is that damage their performance creating a wrong
the steps must be followed in sequential vision by customers.
order, that is, only when one is successfully
achieved, should the other be continued.

★ The transaction cost analysis (TCA) model

It is quite an interesting theory that could be adapted to different organizations and their
different types of costs, also takes into account that costs not only occur in negotiations or
internationalization process but even within the same company, the cost reduction is very
important to expand the benefits of the company, additionally, it offers a study of the
governance markets making the company set its mode of entry to new markets from the
beginning based on the study of costs mentioned above, it is essential to reduce the trial and
error method to take advantage of transactions.

PROS CONS

The most important assumption about this It is necessary to make an estimate of the
theory is its attempt to minimize the different costs implied in every transaction,
combination of ex-ante costs and ex-post these types of approximations are,
costs when making transactions because sometimes, imprecise creating problems
they are not directly creating value for the when establishing the governance markets,
company, it is necessary to reduce as much which are the basis of this theory.
as possible these costs in order to get more
revenue.

The governance markets provide the choice The transaction cost analysis includes two
of international market entry, the firm perspectives on human decision making, but
should research its own international the bounded rationality which is the inability
activity whether externalization costs are to process all the available information of
higher than internalization costs. This will the environment could spoil the search for
reduce the risk of hiring agencies or optimal cost reduction for the company.
importers if it's better to establish a firm's
subsidiary in the foreign market.

★ The network model

This model is governed by business networks where the actor are autonomous. It's very
interesting because they aren’t governed by the same concept of common hierarchy, but they
make it more flexible and adaptable to changes in the environment. In addition, the fact that
its network model generates national network relationships that can be the path to networks in
other countries.

PROS CONS

The hierarchy that they handle is based on The individual company is dependent on
autonomous actors, with an interdependence resources that are controlled by other
bilaterally. The hierarchy doesn’t have an companies and depending on the positions
organizational unit from above, but rather in the network companies can gain access.
the business network is organized by each Which is not very efficient due to several
actor’s willingness. Which makes the companies and several resources are
commercial side more flexible and that is required for its adaption.
really beneficial.

The process of internationalization of the Industrial networks are usually not easily
company when entering a network advances observed by potential participants.
faster.

★ Born globals

Is really interesting that they are a globalized company without any long-term
internationalization period, it’s very timely and innovative. On the other hand, they have
constant information on the global geographical environment and as trade influences the
exchange of this information, it generates constant learning and growing involvement.

PROS CONS

The company from the beginning pursues a Global natives must choose an area that
globalization vision. Which generates a suits the marketing mix, which leaves out
broader environment and a distinction in its small businesses that cannot take a
firm compared to how visionary they are, multinational approach,
which generates more innovation and better
developed procedures.

Technology is an extremely necessary Being dependent on a single product in the


resource for firms, and by being oriented to market niche generates little adaptation to
the technology that operates in international the market and makes them more
markets from the beginning, it generates a vulnerable.
better global expansion.

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